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Microfinance Securitization

In 2006, Developing World Markets structured and closed a securitization of cross-border loans to 26 microfinance institutions (MFIs) in 17 countries. The transaction is channeling approximately $60 million of international capital to over 1 million low-income micro-entrepreneurs in Latin America, Eastern Europe, Southeast Asia and the Middle East.

The multiple-currency investment consists of both debt and equity tranches in USD, EUR and GBP. The Senior tranche was rated A1 by MicroRate, a Washington, D.C.-based risk assessment firm, making the securitization the first microfinance Collateralized Loan Obligation (CLO) ever to be rated.

The structure consisted of 3 classes of coupon-bearing notes, Senior, Mezzanine and Junior, supported by super-subordinated notes and equity notes.

The investors consist of several pension funds, the US Overseas Private Investment Corp (OPIC), an insurance company as well as several main-stream investment funds, who share a desire to alleviate poverty through international capital markets financings.

DWM believes that as the microfinance industry expands and matures, microfinance institutions will "graduate" from traditional not-for-profit funding sources and tap the international capital markets for larger and longer term funding, just as institutions in the formal banking sector do.